Client onboarding during pandemic and gamification: The FXOpen experience
The “extra” clients that we saw in 2020 unfortunately had less financial markets knowledge and considerably less experience.
The year 2020 was the perfect storm.
In the middle of 2020, most brokers reported record-high numbers of clients onboarded and subsequent volumes. Now we are almost in the middle of 2021, and one year later, the conclusions are ready to be drawn – who were those clients and how well they fit with the overall business strategy of FX brokerages?
Speaking from the FXOpen experience, we also saw an influx of traffic, new registrations, and onboarded clients in 2020. Most of the industry attributed it to the volatility which reigned all 2020 as well as people being stuck at home and looking for additional income and even using CFD trading as a way to distract themselves from the pandemic.
For all FXOpen brokerages, our main target audience always was professional semi-professional traders with experience and an in-depth understanding of financial markets.
It was always our goal to cater to this particular segment and those are the customers who are able to appreciate the product that we offer most. We are proud to say that we have traders who have been active with us for more than 12 years and our average client lifecycle equals 22 months.
The “extra” clients that we saw in 2020 (in addition to our regular customers) unfortunately had less financial markets knowledge and considerably less experience, which led to 62% of them stopping trading before the end of the year – a rather abnormal situation for us.
After further analysis, we also saw that most active trading came from our existing/regular customer base and was related to volatility.
Moreover, the gamification of trading that we are seeing in the last few months across the industry, which sort of treats trading as a game rather than a high-risk investment activity, is also rather problematic.
For now, the gamification of finance does not create better investors; it just encourages more frequent armchair trading. Unless traders learn the risks, it might be game over.
The increase in interest in trading is great, but misunderstanding the risks involved is far from great. It results in much shorter life cycles, which are always painful for A-book brokers, and potential complaints filed with the regulators due to trading results being not at the level initially expected by the customers.
We always welcome new traders and we want them to be profitable, and this entails proper risk management, appropriate marketing and disclosures on the broker’s part, and a good understanding of financial markets on the clients’ part.
That’s why we see the onboarding of inexperienced traders with a gaming mindset only as a short-term side effect of the current trading environment. We do not cater to this segment as our services aim for our clients’ success.
For example, instead of virtual fireworks, FXOpen’s TickTrader platform offers a customizable trading experience with more than 1200 advanced trading tools at their disposal and sophisticated data analysis for their trading strategies.
Trading is offered directly through the platform or via a FIX, REST, or WebSocket API, with fully transparent Level 2 pricing and advanced order types (IoC, Iceberg, Hidden, Stop-Limit, Slippage Control).
Our clients also have access to trading via MT4 and MT5. No fireworks, though.